European glass container demand is showing signs of a modest recovery and 2013 contract price increases are holding firm. Volumes were up 1-2% on a y/y basis in the 1st Quarter of 2013, an improvement from 5-7% lower demand throughout most of 2012. By category, beer continued to hold up fairly well at stable to low single-digit growth, particularly in northern Europe. Soft glass container demand across Europe since late 2008 has been economically driven, a customer shift from all glass bar sales to glass and metal can take-home purchases.

2013 European contract prices were largely set by the end of February, up 3-4% on average. Prices increased in a 2-3% range in northern Europe but in a 5-7% range in southern Europe. The higher pricing for southern Europe was surprising. One reason was recently closed capacity from OI in Spain as well as layoffs from #4 player Vidrala and #2 player Saint Gobain (Verallia). Vidrala raised prices by only 2% on average in France but in a 5-7% range in Spain, where Saint Gobain’s Verallia operations had an ~7.5% price increase. Longbow’s results indicated there was modest share loss for the big players compared to 2012 as expected, particularly for Portuguese-based BA Glass.

North America

North American glass container demand and volumes were down 2-3% y/y in the 1st Quarter of 2013 due to bad weather. Craft beer category volumes were up mid-single-digits y/y, while mass produced beers were down low to mid single-digits. The wine & spirits category experienced low-single digit y/y growth, an ongoing pattern. Annual contract price increases for glass containers have been stuck in a 1-2% range since the first of the year. Supply conditions remained relatively tight over the last 6-12 months, which, along with energy cost adjustments on a significant portion of contracted volumes in North America, enabled manufacturers to successfully recover modestly higher production costs.

South America

There was substantial resistance to price increases again in South America this year. Overall glass container demand was up in a 5-7% range y/y. Increased beer demand in larger refillable containers among lower-end consumers has been the key driver behind the higher demand for the last 5-6 months. Weather was also favorable during the 1st Quarter of 2013. Demand outside of beer still experienced high-single digit increases, particularly within the wine & spirits categories. Prices are in a 7-8% range y/y in 2013.

OI raised prices by 8% on average in Brazil, while Vidraria Ancheita implemented a 7% average increase and Verallia prices were up 8-10%. This rise follows a high single-digit increase in early 2012. The Brazilian market in particular continues to recover from competitive pricing in 2011 following OI’s purchase of CIV in late 2010. The survey indicated the higher pricing was taken with little to no demand resistance.

China

The survey covered distributors and glass bottle manufacturers in China for the first time in the 1st Quarter of 2013. Glass container demand was up low to mid single-digits y/y in China, with competitive pricing among smaller players. Glass container demand was up 3-5% on average on a y/y basis since January, 2013. Demand trends were mixed by region depending on weather conditions but were most positive at high single-digits y/y in Guangdong province.

The higher demand across China came entirely from 5%+ beer growth, since other categories such as wine did not change. Smaller players in China were aggressively cutting pricing with production costs holding steady. Major players such as OI were able to hold pricing relatively stable since the first of the year.

I walked through a craft store recently, and noticed how few things that looked like glass really were glass. They had plastic tumblers in a design made classic by the glass manufacturers who developed it. They had plastic picture frames and business card holders with “Glasstique” in the brand name. Things made of glass are beautiful, they are valued, but these days many things that look like glass are not glass. In the entire store I found two glass items that were really made of glass — glass beads for decoration and glass buttons made by glass artists.

When I meet people for the first time and they hear that I do something that is about glass, they always have wonderful glass-related stories to tell. They talk about a glass dish that their grandmother had, or beautiful goblets they used in a restaurant. Many have seen some of the documentaries shown on television about how glass is made and artistic glass. Glass is a material that we see as beautiful.

When Arizona tea first introduced tea in blue, green and white bottles, I saw the empty bottles used in so many offices as vases, pencil holders and decorative items. Today many of these bottles use decorative appliques to get the effect of colored glass with clear glass.

I am told that beer packaged in non-glass containers tastes differently than the same beer in glass bottles. There are bottle plants owned by beer manufacturers and wine makers now, a testament to the value of glass as a packaging material. Fruit sold in glass jars and tomato sauces of many flavors in glass jars have a higher perceived value than the same products in non-glass containers.

A friend recently brought me a Bawls Guarana bottle, which has a pattern of “bumps” on the bottle (the company says the bumps keep the bottle from slipping out of your hand). The Bawls bottles are blue, brown and white. Once again an innovative company has found a way to make a special impression with glass containers!